PENSION SCHEMES ACT 1993, PART X



PENSION SCHEMES ACT 1993, PART X

DETERMINATION BY THE PENSIONS OMBUDSMAN L00707

|Complainant |: |Mrs S Williams |

|Scheme |: |Rank Pension Plan (the Plan) |

|Principal Plan Employer |: |Rank Leisure Holdings plc |

|Employer |: |Rank Holidays Division |

|Trustee | |Rank Pension Plan Trustee Limited |

MATTERS FOR DETERMINATION

1. Mrs Williams contends that she should be allowed to draw unreduced benefits from the Plan from age 60 years. The respondents do not agree.

2. Some of the issues before me might be seen as complaints of maladministration while others can be seen as disputes of fact or law and indeed, some may be both. I have jurisdiction over either type of issue and it is not usually necessary to distinguish between them. This Determination should therefore be taken as the resolution of any disputes of facts or law and/or (where appropriate) a finding as to whether there has been maladministration and if so whether injustice has been caused.

RELEVANT PROVISIONS and DOCUMENTS

Trust Deed and Rules

3. The Plan was set up by a Definitive Trust Deed and Rules dated 8 April 1963. The Plan is governed by a consolidated Definitive Trust Deed and Rules dated 28 May 1998. Rule 16 (c) deals with early retirement and provides:

“In the event of a Member retiring from Group Service, with the consent of the Employer, either at an any time prior to Normal Pension Date on account or Incapacity, or (i) at or after the Member’s 50th birthday if the Member retired prior to 1st January 1990, or (ii) at or after the Members’ 55th birthday if the Member retired on or after 1st January 1990 for any other reason, such Member shall ……be entitled on such retirement, in lieu of all other benefits to which the Member would otherwise be entitled under the Plan, to an immediate pension of reduced amount ….equivalent to the actuarial value of the Member’s interest in the Plan, the amount of such reduced pension and such actuarial value being determined by the Actuary.

PROVIDED THAT:-

1) in the event of a Member, who was in Group Service on 17 May 1990, retiring at any time on account of Incapacity, or after his 60th birthday but prior to Normal Pension Date for any other reason, his pension will be calculated to the date of leaving Group Service but without any reduction for earlier payment. If a Member retires prior to his 60th birthday for any other reason, his pension will be reduced for earlier payment as if his Normal Pension Date were the Member’s 60th birthday.

4. Schedule 1 to the Rules defines “Normal Pension Date” (or Normal Retirement Age (NRA))as the member’s 65th birthday.

5. Rule 24 deals with benefits on termination of membership. Sub paragraph (d) provides that any benefit to which a member is entitled under Rule 24 remains subject to the Rules of the Plan and that the provisions of Rule 16(c) apply to any pension to which the former member is entitled.

6. A Deed of Amendment was executed on 16 February 1999. Rule 16(c) as set out above was deleted and the following substituted:

“(c) Early Retirement

For the purpose of this Rule, “Immediate Pension” means an immediate pension (paid in lieu of all other benefits to which the Member would otherwise be entitled under the Plan) of reduced amount …. equivalent to the actuarial value of the Members interest in the Plan, the amount of such reduced pension and such actuarial value being determined by the Actuary.

Early Retirement (other than on grounds of incapacity)

A Member who leaves Group Service (other than on grounds of Incapacity) before Normal Pension Date but after reaching age 50 may choose Immediate Pension.

However, the following special provisions apply where:

I) the Member was in Group Service on 17 May 1990 and is retiring before Normal Pension Date with the consent of his or her Employer. In these circumstances, Immediate Pension will be defined as above except that any reduction will only take account of the period (if any) by which retirement precedes age 60;

II) the Member was in Group Service before 6 April 1991 and is retiring before Normal Pension Date other than as described at (I) above. In these circumstances Immediate Pension will be as defined above except that;

(III) if the Member is female, any reduction to that part of her pension which is attributable to Pensionable Service before 6 April 1991 will only take account of the period (if any) by which retirement precedes age 60;”

7. Further Deeds of Amendment were executed on 27 May 1999 and 31 March 2000 but the amendments are not relevant to Mrs Williams’ complaint.

Announcements and Circulars

8. In February 1991 an announcement was issued (the February 1991 Announcement) by the Rank Organisation plc on behalf of Plan employers. It read:

“The Company has recently completed a major review of its current pension arrangements in the light of the trend towards equal retirement ages for both men and women. We are therefore pleased to announce that with effect from 6th April 1991 all members of [the Plan] will have a Normal Pension Age of 65.

…. As the existing female members may well have been planning to retire at age 60 it has been agreed that although the Normal Pension Age has been changed to age 65 they will be able to retire at any time between age 60 and 65 with their retirement benefits calculated to the date of leaving being paid without any reduction to reflect an early retirement. In practice this means that they will have a flexible retirement age between ages 60 and 65.

Whilst the Normal Pension Age for male members is unchanged, some improvements are being made in respect of existing members who early retire between ages 60 and 65. To maintain equal treatment between male and female members, an existing male member retiring between ages 60 and 65 will have his retirement benefits calculated to the date of leaving without any discount as a result of early payment. In other words current male members will also have flexible retirement ages between 60 and 65.

…Early retirement pensions can only be payable with the agreement of the employing Company.”

9. A circular was issued to all members of the Plan on 6 October 1993 (the October 1993 circular) . That circular dealt with a review of the Plan by Union Pension Services (UPS) and included the following:

“The UPS review was based upon pension schemes as they stood five years ago in 1988. Since then Rank has introduced a number of changes, including;

a) the equalisation of retirement ages in 1991

b) the option, for members in service at April 1991, to retire, with the company’s consent, between 60 and 65 with their pension calculated on the benefits earned to the date of retirement and without being discounted for leaving prior to the normal retirement date.”

10. The UPS report was also mentioned in the 1993 Plan report which said on page 11 in relation to the findings of the UPS review:

“First, the [UPS review] failed to take into account the discretionary increases to pensions made by the trustees since 1988, on top of the guaranteed amounts. Secondly, it did not take account of a number of changes made to the [Plan] over the past few years, including moving to the same retirement age for everyone; allowing members who joined the Plan before April 1991 to retire any time between 60 and 65 with no reduction in pension earned,…”

11. On 10 March 1999 an Announcement (the March 1999 Announcement) was issued. It read:

“On 2nd February the Trustee Board for the Rank Pension Plan agreed to an improvement in the early retirement provisions which had been proposed…

The effect of the improvement is that members of the [Plan] can now take early retirement at any time from age 50 onwards as of right. Previously company consent was required.

If you would like to find out more about how this will effect you, please contact your appropriate Head of Human Resources.”

12. A circular was sent to active members of the Plan on 1st August 2000 (the August 2000 circular) on the subject of early retirement. It read, in part, as follows:

“Last year the Company advised you of an important change in the early retirement provisions of the [Plan]. As it appears there may be some misunderstanding about the nature of the change, I am writing to you by way of clarification of the revised provisions.

The Company, with the agreement of the Trustee, amended the Rules of the Plan so that if you are leaving the employment of Rank, you now have the right to take an early retirement pension. In order to exercise this new entitlement you must be at least age 50. In addition, where early retirement is taken as of right under this new provision, the pension payable will be subject to a reduction to take account of early payment. This means that the immediate pension will be discounted by reference to the number of years remaining to age 65. Certain protections apply to benefits in respect of service prior to 6 April 1991 and you will be provided with details at the relevant time if this affects you.

The [NRA] under the Plan remains age 65. It was the case, and still can be the case, that in certain special circumstances an enhanced early retirement pension can be offered. This is by no means automatic and such an arrangement requires the express consent of the particular business within the Group as well as their agreement to fund the cost of the enhancement.”

Plan Booklets

13. The April 1991 version of the Plan members booklet dealt with early retirement on page 11 and included the following:

“With the Organisation’s agreement, you may be able to retire between age 55 and NRA (or earlier in the event of serious ill-health).

….Existing members of the Plan at 5th April 1991 ….

Subject to the Organisation’s agreement, you will be able to retire early between the ages of 60 and 65 on preferential terms. Your benefits will be calculated to the date of leaving, and payable without any reduction as a result of the benefits being paid from an earlier date.

14. The April 1997 edition of the Plan booklet said on page 4 in relation to early retirement:

“Subject to the agreement of the Company, you may be able to retire at any time from age 50 onwards. Your pension and tax free cash sum will be payable immediately and calculated as if you had retired at {NRA] …However, you should note that:

Pensionable Service will be based on service actually completed at the date you retire.

Your pension and tax free cash sum will be reduced because you are retiring before NRA. The amount of the reduction varies from time to time, and details are available on request. If you were a member of the Plan on 5th April 1991 (including former members of the Mecca Leisure Pension Schemes who joined the Plan on that date), there will be no reduction if you retire from service on or after age 60.”

15. The information relating to early retirement contained in the April 1998 version of the Plan booklet was the same as that in the previous (April 1997) edition.

16. The November 1999 edition of the members’ booklet included in relation to early retirement:

“If your employment …. ends after age 50 but before NRA, then you can elect to take an early retirement pension from the Plan.

Your pension and cash sum will be paid immediately, however you should note that:

Pensionable Service will be based on service actually completed at the date you retire.

Final Pensionable Earnings will be as at the date you leave employment.

Your pension and cash lump sum will be reduced because you are retiring before [NRA].”

NRA was again defined as age 65.

MATERIAL FACTS

17. Mrs Williams was born in April 19464.

18. She took up employment with Haven Leisure Limited, which became part of the Employer, in July 1989 and joined the Plan. When she joined the Plan her NRA was 60 years.

19. In 1999 the Divisional Finance Director discussed with Mrs Williams (who was then Director of Financial Services for the Employer) a planned reorganisation. As a result Mrs Williams agreed to leave her employment some time in 2000 when she would be 55 years old.

20. In early 2000 Mrs Williams received a quotation of her pension benefits. The quotation was prepared on the basis that the benefits were reduced for early payment. Mrs Williams queried the figures given.

21. In reply the Employer said:

“…the early retirement benefit quote … has been calculated on the basis of benefits attributable to pre – 6/4/91 service reduced by reference to a [NRA] of 60 and post 5/4/91 service reduced by reference to a [NRA] of 65 as provided for under the [Plan] rules. This relates to the equalisation of [NRA] for men and women.

….. the estimated figures provided ….are, as you say, on an “as of right” basis. The basis of the calculation of the benefit is as described [above]. With effect from February 1999 those aged 50 or above were able to retire as of right and no company consent was required. With effect from that date enhanced early retirement pensions would only be paid with the express consent of the individual business and funded by them.

The reasons you will be leaving the Company this year relates to the restructuring within the finance functions throughout the Division as a whole and your desire to take advantage of the severance arrangements which could apply to you and which were detailed in Russell Margerrison’s letter to you last year. It cannot therefore be assumed that Company consent for an enhanced early retirement pension would automatically be given. The two outcomes are quite separate.

…. The Company has not led you specifically to take early retirement. It is your choice whether or not you seek alternative employment after you leave the Company and therefore take a deferred pension or whether you decide that you would like to retire early. Of course it would be possible for some of your severance package to be used to augment your pension and if this was an appropriate choice and if you would like to discuss the implication of this with me, please do so.”

22. In reply, Mrs Williams said that she did not agree that consent (to her early retirement) had not been given. She said that her decision had been based on what she had been led to believe by information previously supplied that her pension could begin 5 years before her NRA ie at 55, without discount as had been the case with other employees. Mrs Williams also argued that as a female member of the Plan at 5 April 1991 she was entitled to a full pension at age 60 and she had not been told that had changed.

23. In a further letter, Mrs Williams referred to the February 1991 Announcement which stated that, although with effect from 6 April 1991 the NRA for all members of the Plan would be 65, existing female members of the Plan would be able to retire at any time between age 60 and 65 with their pension calculated to the date of leaving without reduction for early retirement. Mrs Williams also referred to the statement on page 4 of the 1997 Plan booklet that there would be no reduction in benefits for members of the Plan at 5 April 1991 who retired from service on or after age 60. She also said that it had been routine for employees leaving service within 5 years of NRA due to reorganisation to receive their pension without reduction for early payment.

24. Mrs Williams remained dissatisfied and instigated the Internal Dispute Resolution (IDR) procedure before referring the matter to my office.

25. Mrs Williams left Rank Holidays Division on 31 October 2000.

26. Mrs Williams contends that she is entitled to draw unreduced benefits from age 60.

27. Mrs Williams refers to the February 1991 Announcement and says that in relation to existing female members planning to retire at 60 no mention is made of the need for consent. She says that the key phrase is “in practise” and that that Announcement could not be clearer for existing female Plan members such as her. She says that the mention of the requirement for consent follows and cannot override what appears above. She further says that when she joined the Plan her NRA was 60 and in view of the special arrangements for existing members at 5 April 1991 she is not retiring early but at her NRA so consent is not required.

28. Mrs Williams refers to the new rules introduced in 1999 which allowed early retirement as of right, ie without consent. She says that while this was announced as a benefit, no mention was made that benefits would be reduced up to age 65. Mrs Williams contends that the changes introduced in 1999 were not properly communicated to members. She refers to members of the Plan at 6 April 1991 as having their right to a non reduced payment (at age 60) being revoked which she says amounted to a retrospective change to benefits which required the express consent of those members affected, which consent was not sought.

29. Mrs Williams says that at no stage before she left was there any suggestion that she would need consent to draw unreduced benefits at age 60 years. She says that many senior staff left at age 60 years with full benefits. She refers to an “Organisational Announcement” issued in October 1999 dealing with the Finance Department restructuring which refers to her taking “early retirement” and says this is evidence that consent was given, particularly as her leaving was arranged in line with the resourcing plans of her Employer and at its convenience.

30. She says that as she has now left service and is a deferred member it is now longer possible for her to obtain consent. She suggests that there is no reason why the Principal Employer ought to withhold its consent to the payment of unreduced benefits from age 60.

31. In support of Mrs Williams’ application a statement has been obtained from Mr M J Evans who was, until his retirement in August 1996, the Group Pensions Manager, an individual trustee and Secretary to the Trustee. He said in relation to the equalisation of NRA for male and female members that it was decided to equalise NRA (which had previously been 65 for males and 60 for females) at 60 but with special arrangements for members of the Plan as at 6 April 1991. According to Mr Evans, such members would have a NRA of 65 but if they retired between the age of 60 and 65 no actuarial reduction would be applied which was reflected in the third paragraph of the February 1991 Announcement. Mr Evans further said that when a member left, a withdrawal form had to be sent to the Pensions Department. Mr Evans produced a copy of the relevant form and pointed out that the form did not include any requirement to indicate if the Employer’s consent to the payment of early unreduced benefits had been given. Mr Evans said that was because consent to the payment of early unreduced benefits was normally granted.

32. Mr Evans supplied further evidence specifically in relation to employees who had left with deferred benefits. He said that basis for the requirement for employer consent was to prevent operational difficulties caused by the sudden early retirement of a key employee. Mr Evans suggests that in the case of a member who had previously left service the requirement for consent did not apply.

33. Mrs Williams says that it was clearly intended that although the Barber judgment referred to by Mr Evans set the minimum standard, employers could choose to be more generous and she suggests that the Plan employers chose not to prejudice existing female members by requiring them to delay their retirement until age 65. She argues that if female employees previously generally retired at age 60 on unreduced benefits, any change to that position had retrospective effect or represented a change to her accrued rights. Mrs Williams is aware that, in connection with another similar complaint, further evidence from directors at the time has been submitted, which evidence she asks me to take into account in considering her case.

34. Mrs Williams estimates that she has suffered a financial loss of a minimum of £210, 000 (although that figure appears to have been calculated on the basis of drawing unreduced benefits at age 55 which Mrs Williams now accepts she was not entitled to do). She has since revised that figure to £110,000. She says that she was distressed and disappointed as she had believed that she would receive a reasonable pension when she left her employment. She had planned to use her redundancy payment to “bridge the gap” to age 60 when she had expected to be paid unreduced benefits from the Plan. She says that in consequence she has had to seek other full time employment and she points out that her current job pays her £20,000 less per annum at current rates.

35. Whilst Mrs Williams accepts that she received the quotations referred to in paragraph 20 above, she says that she did not believe they were applicable in her case. She says that when she queried them there was some confusion and she also refers to the deferred benefits certificate she received on leaving service which showed an accrued pension of £14,216.92 per annum.

36. Rank plc (Rank) responded on behalf of the Principal Plan Employer, the Employer having been sold in 2000.

37. Rank said that there was no absolute right to the payment of unreduced early retirement benefits under the rules of the Plan. Rank said that prior to 2 February 1999 early retirement was only available with the consent of the member’s employer or the Principal Employer. If consent was given, the member’s benefits were actuarially reduced in respect of the period between the member’s actual retirement date and his or her 60th birthday. If the member had attained 60 years on retirement, no actuarial reduction would be applied. After 2 February 1999 the Deed of Amendment dated 16 February 1999 introduced a new early retirement provision so that members could elect to take early retirement without the consent of their employer but in which case benefits would be actuarially reduced in respect of the period remaining until the member’s NRA. The provision permitting early retirement without actuarial reduction with employer consent was retained. There has been no reduction to accrued rights as no right to an unreduced pension without consent ever existed under the Plan rules.

38. In Mrs Williams’ case, her NRA is 65 years. However no actuarial reduction is applied to benefits accrued by a female member prior to 6 April 1991, being the date NRA for male and female members was equalised under the Plan. Rank says that NRA for female members rose after 6 April 1991 to 65. If female employees had been allowed as of right to draw an unreduced pension from age 60 after 6 April 1991 the same right would have had to have applied to male employees (by virtue of the Barber decision). The combined effect of allowing a right to retire as of right on unreduced benefits at age 60 would have had a significant impact on the funding of the Plan. Instead, a consent requirement was retained.

39. Rank says that Mrs Williams requires the consent of her Employer to obtain unreduced benefits from age 60. The Principal Plan Employer is the only employer which now has power to grant unreduced benefits to Mrs Williams. The Employer did not consent and the Principal Plan Employer does not consent.

40. Rank says that the “Organisational Announcement” issued in October 1999 and referred to by Mrs Williams did not constitute consent to the payment to her of unreduced early retirement benefits. Any consent would have been the subject of private correspondence with Mrs Williams in February and March 2000.

41. Rank says that Mrs Williams’ employment was terminated as her position became redundant. It says that early retirement quotations were sent to Mrs Williams in February and March 2000. Those quotations were calculated on an “as of right” basis and Mrs Williams was therefore aware of the level of her benefits, including the effect of reduction by reference to age 65 years, before she actually left her employment.

42. Rank says that other factors, aside from Mrs Williams’ claim that she sought other employment when she realised that her pension would be approximately £2,000 per annum less than she had anticipated, influenced Mrs Williams’ decision to continue working. Rank says that her basic salary on leaving was £58,750 per annum and even if an unreduced pension had been payable to her this would only have amounted to about £11,000 so her income would have been significantly reduced in any event.

43. Rank does not accept as claimed by Mrs Williams that it was, at the time, common practice for senior executives to be allowed to leave 5 years before NRA on unreduced benefits. Rank says that, at the time Mrs Williams was made redundant, the Group’s financial circumstances and those of the Plan were somewhat less secure than had previously been the case. Rank says that even if there had been at some time an intention to consent to early retirement (on unreduced benefits), such a policy would not create a right and policies can and do change.

44. Rank refer to Rule 24(d) of the Plan Rules, mentioned above and say that the requirement for consent does apply to Mrs Williams as a deferred pensioner. Rank say that Mr Evans’ further evidence fails to take into account Rule 24(d).

45. The Trustee, in its formal response to the complaint, referred to the February 1991 Announcement which notified Mrs Williams that her NRA would be 65. The Trustee said that announcement had to be considered in its entirety and pointed out that the concluding paragraph stated that “Early retirement pensions can only be payable with the agreement of the employing Company.”

46. The Trustee accepted that the March 1999 Announcement did not specifically refer to the fact that where early retirement benefits are taken without the Employer’s consent following the 1999 changes, benefits will be reduced to take account of the period by which early retirement precedes age 65 years. However, the announcement directed members to contact their “Head of Human Resources” for further information as to how this would affect them. A further announcement was issued in August 2000 which put the matter beyond doubt. The Trustee said that literature issued in connection with the Plan has consistently emphasised the need for Employer consent to take early retirement on beneficial terms. The Trustee says that Mrs Williams was aware of and understood the need for consent.

47. On the matter of consent to amendments to the Plan Trust Deed and Rules, the Trustee says that before the changes introduced in 1999 the Trust Deed and Rules provided that if Employer consent was obtained, a member who was in service on 17 May 1990 and who retired from service prior to NRA might choose immediate benefits reduced to take account of the period by which retirement preceded age 60 years. After the 1999 changes that was still the position except that where Employer consent was not obtained a member retiring from service after age 50 could choose immediate benefits reduced to take account of the period by which retirement precedes age 65 save where such reduction would be inconsistent with the equal treatment requirements. In the case of a female member, the benefits accrued prior to the equalisation of NRA on 1 April 1991 are reduced to take account of the period by which retirement precedes age 60. The Trustee says that there has been no reduction to accrued benefits as the position both before and after the Deed of Amendment dated 16 February 1999 was that consent was required for the payment of unreduced benefits from age 60.

48. In response to Mr Evans’ evidence, the Trustee said that the Barber judgment (relating to the equalisation of benefits for male and female members) only requires that pre 6 April 1991 benefits for female members in service at that date who retire at age 60; and post 17 May 1990 and pre 6 April 1991 benefits for male members in service at that date who retire at age 60 are unreduced (an approach generally referred to as “benefit slicing”).

49. The Trustee says that Mr Evans’ understanding (that all members in service as at 6 April 1991 should be entitled to immediate payment of unreduced benefits from age 60) would result in such members receiving as of right more generous benefits than required by the Barber judgment. The Trustee says that it was difficult to reconcile Mr Evans’ understanding with the Plan rules as drafted both before and after the 16 February 1999 changes. The Trustee says that, before that date, rule 16 stipulated that, in the event of a member retiring from Group Service with the consent of his or her Employer, immediate pension would become payable but reduced

(i) in the case of members in Group Service on 17 May 1990 to reflect the period by which retirement preceded age 60; and

(ii) in the case of other members to reflect the period by which retirement preceded age 65.

50. The Trustee says that after 16 February 1999, rule 16 additionally stated that, in the event that consent was not obtained, members could elect for the payment of immediate pension, reduced to reflect the period by which retirement preceded age 65 (subject to any benefit slicing as required by the Barber judgment).

51. The Trustee says that there was no evidence that the Principal Employer (whose consent to Plan changes was required) ever agreed to members in service on 6 April 1991 receiving as of right benefits more generous than those required by the Barber judgment. Prior to giving such agreement the Principal Employer would have explored with the Plan Trustee and Actuary the cost flowing from the more generous benefits and this did not happen.

52. The Trustee accepts that it was not possible, following the Barber judgment, to provide for pre 6 April 1991 benefits for female members in service at that date (and post 17 May 1990 and pre 6 April 1991 benefit for male members in service on 6 April 1991) to be reduced on retirement at age 60. The Trustee says that it was for that very reason that the 16 February 1999 rule change provided for benefit slicing where required by the Barber judgment. The Trustee acknowledges that, prior to 16 February 1999, Plan employers generally consented to early retirement so that members in service at 6 April 1991 received unreduced benefits at age 60 (ie benefits which were more generous than required by the Barber judgment). The Trustee says that the reference by Mr Evans to employer consent would not be relevant if, on a proper construction, members in service at 6 April 1991 are entitled to immediate payment at age 60 of unreduced benefits.

CONCLUSIONS

53. Under the current Plan rule (as amended by the Deed of Amendment dated 16 February 1999) which is set out above, Mrs Williams’ entitlement, as a female member in service before 6 April 1991 is to a reduced immediate pension. However, any reduction to that part of her pension which is attributable to service before 6 April 1991 will only be in respect of the period by which retirement precedes age 60. Mrs Williams can only bring herself within sub-paragraph (I) if she has Employer consent.

54. I am satisfied that under the Plan rules in force prior to February 1999, there was no provision which permitted early retirement as of right at age 60 on unreduced benefits, at least so far as male Plan members were concerned (although prior to the equalisation of NRA for both male and female members, female members had a NRA of 60). That was the case for both active members seeking to retire from service and members with deferred benefits (see Rule 24(d)). Accrued rights have not been adversely affected as at no stage was there any absolute right to the payment of unreduced benefits from age 60. I deal further below with the position regarding female members such as Mrs Williams.

55. Mrs Williams has argued that as a female member, for her to draw benefits from age 60 would not constitute early payment as her NRA was originally 60 and she did not consent to the change to age 65. It is accepted that prior to the Barber judgment, Mrs Williams’ NRA under the Plan was 60 whereas male members had a NRA of 65. The Barber judgment, given on 17 May 1990, required the equalisation of NRA for male and female members. However, it was not retrospective and benefits attributable to service prior to 17 May 1990 did not have to be equalised. However from that date until the date of equalisation (ie the date on which measures eliminating discrimination between male and female members are introduced by the particular pension scheme in question) those members disadvantaged by the particular provision (for example, a NRA of 65 for male members compared with a NRA of 60 for female members) had to be granted the more favourable terms. The Plan equalised NRA for male and female members with effect from 6 April 1991. Thus benefits for male members attributable to service from 17 May 1990 to 5 April 1991 must be calculated by reference to a NRA of 60, ie on an unreduced basis. Thereafter, ie from 6 April 1991, a NRA of 65 for both male and female members applied.

56. Mrs Williams has said that she did not consent to the change to her NRA. She has further commented that it was not until 1998 that the Plan rules were amended to incorporate the equalisation provisions. Section 62(3) of the Pensions Act 1995 provides that in relation to a term which is “less favourable to the woman than it is to the man, the term shall be treated as so modified as not to be less favourable.” Although the Act did not come into effect until 1 January 1996 it was retrospective in that equalisation measures had to be taken in respect of service after 17 May 1990. The requirements of the Act are overriding so that pension schemes must comply with them, irrespective of the actual provisions in the particular scheme’s governing documentation. Section 65 also empowers trustees with inadequate amendment powers in the scheme documentation to make whatever rule amendments are necessary to ensure compliance with the equal treatment provisions without Employer consent. Under the provisions of the Act, pension schemes are deemed to have equal treatment provisions. The fact that the Plan was not formally amended until some years later is not therefore relevant.

57. Section 67 of the Pensions Act 1995 provides statutory protection of entitlements and accrued rights. That provision provides that any amendment power must not be exercised in “a manner which would or might affect any entitlement, or accrued right, of any member …. acquired before the power is exercised” unless certain requirements are satisfied. Essentially, an actuary’s certificate is required certifying that the proposed amendment would not adversely affect any member in respect of his entitlements, or accrued rights, acquired before the power of amendment is exercised. Mrs Williams’ accrued rights have been protected by the benefit slicing arrangements set out above, whereby benefits relating to her pre 6 April 1991 service are unreduced. As there was never any absolute right to retire at age 60 on unreduced benefits it follows that as that remains the position, there has been no reduction in accrued rights.

58. To sum up, I am satisfied that Mrs Williams’ NRA under the Plan is 65 years and that the early payment of unreduced benefits at age 60 (except in relation to benefits attributable to pre 6 April 1991 service) is subject to the Employer consent.

59. On the issue of consent, Mrs Williams has pointed to the internal announcement issued in October 1999 in connection with the finance department reorganisation. Although that announcement refers to Mrs Williams taking early retirement, I do not think it can be construed as evidence of consent to the payment of unreduced benefits from age 60.

60. Mrs Williams has produced no other evidence that consent was forthcoming and indeed her case is that she believed that consent was not required or was routinely given without formality which are issues I consider further below. I do not accept Mrs Williams’ claim that she was unaware at any time before she left that consent would not be forthcoming. Prior to her departure she had received up to date benefit quotations on the basis that a reduction for early payment (ie before age 65) would apply which quotations she queried. I do not think that there was any justification for Mrs Williams to proceed at that stage on the basis that those quotations were not relevant to her situation. It was clear from the letter dated 26 May 2000 that consent was not forthcoming. Mrs Williams was aware, before she left service, that the Employer’s decision was not to grant unreduced early retirement benefits. The Principal Employer has not reversed that decision. Pursuant to Rule 24(d) the requirement for consent applies to Mrs Williams as a deferred member.

61. I next consider whether Mrs Williams was given to understand that despite the requirement for consent in the Plan rules, her benefits would be paid at age 60 without reduction for early payment. I consider first the information generally available to Plan members and then information provided specifically to Mrs Williams.

62. Mrs Williams has referred to the Plan booklets. Although the payment of unreduced benefits from age 60 is mentioned, it is in the context that the employer’s agreement to early retirement is forthcoming. Read carefully, the Plan booklets correctly represented the position under the Plan rules.

63. Central to Mrs Williams’ case is the February 1991 Announcement. The second paragraph is critical. That paragraph, read in isolation, states that existing female members “will be able to retire at any time between age 60 and 65 with their retirement benefits calculated to the date of leaving being paid without any reduction to reflect an early retirement (my emphasis)”. I agree that the Announcement must be read as a whole and that the final sentence refers to early retirement pensions being payable only with the consent of the employing company. Therefore as the NRA for all members is 65, any pension paid earlier must be with the consent of the employing company. However, the second paragraph specifically refers to the change to the NRA before going on to deal with the position of existing female members who may have been planning to retire at age 60. That paragraph gives the impression that, notwithstanding the change to NRA, an unreduced pension will be paid to an existing female member between ages 60 and 65.

64. Further, the February 1991 Announcement should be considered in the light of the then prevailing policy relating to early retirement. Mrs Williams has said that it was usual for members to retire at age 60 on unreduced benefits. Mr Evans’ evidence, which I accept, supports Mrs Williams. Mr Evans said that for some time, members who retired at age 60 had been paid unreduced benefits. Such retirements were processed routinely on the basis that employer consent was forthcoming without formal evidence of that consent being required.

65. The further circular, issued in October 1993, did refer, at paragraph (b), to the need for company consent for retirement between 60 and 65 without benefits being discounted. However, the comment in the 1993 Plan report did not and implied that for pre April 1991 members retirement between 60 and 65 without reduction in benefits was an as of right entitlement.

66. The March 1999 Announcement did not assist and, as acknowledged by the later Announcement dated 1 August 2000, gave rise to some misunderstanding. That later Announcement did set out, in the third paragraph, the need for express consent for “an enhanced early retirement pension”. I consider that the Announcement was sufficient to have alerted members to the need for consent for retirement before age 65. However by then Mrs Williams had already found out that she would not necessarily be paid unreduced benefits from age 60.

67. Against the background I have set out, it is not difficult to see why Plan members, in the absence of specific information, may have formed the view that early retirement from age 60 without reduction in benefits would automatically apply. I find that there was a failure to provide clear and unambiguous information regarding the Plan and early retirement and that such failure amounted to maladministration on the part of the Trustee, with whom principal responsibility for the provision of information regarding the Plan rested.

68. I turn now to the specific information given to Mrs Williams. Once Mrs Williams, in view of her forthcoming departure, commenced making enquiries about her pension entitlement she became aware, from the quotations that she received, that her benefits would be reduced for payment from age 60. However, I accept that prior to then there was a considerable period when she believed, based on the misleading or incomplete general information she had received (reinforced by the policy of paying unreduced early retirement benefits) that she would be able to draw unreduced benefits from age 60.

69. Generally, the provision of incorrect or incomplete information does not of itself create any legal entitlement. That will depend on the extent to which, if at all, the incorrect or incomplete information was relied upon and what the position would have been, had the correct information been given.

70. Mrs Williams has not suggested that at any time before her departure from service she took or failed to take any steps in reliance upon her belief that she would be entitled to draw unreduced benefits from age 60.

71. I have also considered whether, when she left service, Mrs Williams was prejudiced by her belief that she would be able to draw unreduced benefits at age 60. Mrs Williams’ departure was by redundancy and was subject to a redundancy agreement, details of which I have not seen. However, it is not disputed that Mrs Williams wished to take advantage of severance terms offered by her Employer. She has not suggested that she agreed to the redundancy terms offered in reliance on her belief that she would be entitled to draw unreduced benefits from age 60. Indeed, she has specifically confirmed she regarded the matter of her redundancy as a separate issue and that her pension was not discussed at that time or in the context of her redundancy. There is, therefore, no suggestion that her decision to take the redundancy settlement offered was dependent on her belief that she could draw unreduced benefits from age 60. In any event, it may not have been open to Mrs Williams, even if she had not chosen to avail herself of the redundancy terms offered, to have remained in service.

72. She says that in consequence of being unable to draw unreduced benefits from age 60 she had to seek alternative full time employment and that her current position pays considerably less than her former employment. Even if I accepted that, had it not been for the unavailability of unreduced benefits at age 60, she would not have sought other employment, Mrs Williams would have been under a duty, once she became aware of the true position, to mitigate her loss. Fortunately, and even though she may not have planned to work beyond age 60, by obtaining other employment she has been able to do that.

73. I accept that when Mrs Williams became aware that her benefits payable at age 60 were less than she had believed, she suffered considerable disappointment and inconvenience and I have made below a direction for the payment of a sum in compensation.

DIRECTION

74. I direct the Trustee to pay to Mrs Williams within 28 days of the date of my final Determination £250 as compensation for injustice in the form of disappointment and inconvenience sustained as a result of maladministration as identified above.

DAVID LAVERICK

Pensions Ombudsman

26 August 2004

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